Amount Deposited under Protest During GST Search can be Adjusted as 10% Pre-Deposit for Appeal: Allahabad HC [Read Order]

In a recent ruling, the Allahabad High Court held that amounts deposited under protest during GST search proceedings can be adjusted towards the mandatory 10% pre-deposit required for filing an appeal under Section 107(6) of the Goods and Services Tax ( GST ) Act, 2017.

The petitioner, R M Dairy Products LLP engaged in the manufacturing and trading of dairy products, had deposited ₹1.40 crore under protest during a search conducted by the Directorate General of GST Intelligence (DGGSTI). Subsequently, an order was passed under Section 74 of the CGST Act, against which the petitioner filed an appeal.

However, the appellate authority dismissed the appeal as non-maintainable for failure to furnish proof of the mandatory 10% pre-deposit.

The petitioner contended that since the deposited amount was still lying with the department, it should be adjusted towards the pre-deposit requirement.

Justice Piyush Agrawal observed that the amount deposited during investigation or search, if not adjusted against any specific demand, retains its character as a deposit and can be appropriated towards the pre-deposit for filing an appeal.

Also read: Delay in Challenging ₹550 Crore GST Demand Condoned: Delhi HC Allows Appeal Despite Late Knowledge of Order [Read Order]

The Court noted that the total disputed tax liability for the relevant period (February to November 2020) was ₹7.06 crore, and the required 10% pre-deposit amounted to ₹70.66 lakh which was well within the ₹1.40 crore already deposited by the petitioner.

The Court noted the Supreme Court’s ruling in VVF (India) Ltd. v. State of Maharashtra, (2023), which held that payments made under protest before adjudication could be treated as compliance with the statutory pre-deposit requirement.

The bench also noted the CBIC Circular No. 172/04/2022-GST dated 6 July 2022, which permitted payment of tax liabilities from available balances in the electronic ledger, the Court held that the amount deposited during the DGGSTI search could be utilized towards the 10% pre-deposit.

Accordingly, the High Court quashed the orders of the appellate authority, directed that the amount deposited under protest be treated as the pre-deposit, and remanded the matter for decision on merits.

The Court further directed that if any shortfall in the required pre-deposit is found upon adjustment, the petitioner must be informed and allowed 15 days to deposit the balance.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates